Westpac on the bleeding edge

After years of treating technology as a secondary priority to operational issues, Westpac, under McKinnon’s leadership, is in the midst of a bank-wide transformation of the software and hardware that sits behind five distinct financial services brands.

Some will find this scary because, in turning the
Westpac
technology ­approach on its head, he is pushing the bank out to the bleeding edge in several critical areas of technology.

Wizened technology types say the key to success is to never be first and, if you are, don’t hire a global consulting firm to help you.

But McKinnon is not your typical technology type. His career path started in finance and evolved into high-level corporate trouble-shooting, including extracting Multiplex from the disastrous Wembley Stadium project in the United Kingdom before readying the company for sale to Brookfield Asset Management.

In the two years since being headhunted by Westpac chief executive Gail Kelly in August 2008, McKinnon has separated technology from operations, changed just about every general manager in technology, reviewed all the systems in Westpac and St George to find the ones best suited to run across the bank and laid out a transformation strategy that will take several years to complete.

Among the staff hired by McKinnon to execute the transformation strategy is Randy Fennel, a rocket ­scientist who is in charge of engineering and sustainability.

Fennel has been in charge of a project that will put Westpac’s outsourcing partner, IBM, under considerable pressure when its 10-year ­contract comes up for renewal early next year.

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Thanks to work done by Fennel, Westpac is one of the first banks in the world to start shifting its computing and networking functions from mainframes to new mid-range machines ­developed by Cisco, EMC and VMware. These in effect allow the bank to shrink 300 servers into the space previously taken by one.

This has implications beyond the savings from using less power and less space. It will allow the bank to test new products in a tenth of the time.

The revamp at Westpac involves changing the customer facing systems in Westpac to the more user-friendly systems developed at St George Bank.

Taking the best from each bank has meant that the customer relationship management system in Westpac will be the standard for the various banking brands under the Westpac umbrella: Westpac, St George, BankSA.

The technology changes are being accompanied by a review to make staff work processes more efficient.

Another of the 13 technology projects involves taking the Hogan core banking platform used by St George and upgrading it to the latest version, then using that for Westpac, which has been using a proprietary system developed in the 1970s.

Westpac, like its main rival, CBA, spends about $1 billion a year on technology. But for many years it did not invest sufficient funds in its systems. As McKinnon changes that it is becoming clear that the St George Bank merger could result in Westpac leading the sector in technology.

ANZ Banking Group’s wealth management strategy is very similar to the Japanese economy – it has been going nowhere for about 15 years.

There are too many failed ANZ wealth management initiatives to list here but suffice to say that the plan by ANZ Australia chief executive Phil Chronican to mimic the strategy of his former employer, Westpac, will not be a walk in the park.

Chronican wants to create, in the next four months, a whole new wealth management brand with no mention of
ANZ
in the title.

However, in trying to repeat the BT Financial Group success story at Westpac, Chronican will have to suppress his natural accountant’s inclination to keep costs down by drawing the business into the skirts of the bank.

Chronican will know from his time at Westpac that BT was and remains a success because of the efforts of its chief executive, Rob Coombe, who now runs Westpac’s retail bank, to protect the company’s culture from the bankers at head office who wanted to stop it from having separate hiring and marketing policies.

Chronican has chosen John Van Der Wielen, an Australian with 25 years’ experience in financial services including running the Lloyds Bank wealth business in London, to run the rebranded wealth management business.

But it is pretty clear he won’t have the autonomy of his predecessor Harry Stout, who is returning to the United States.

T

ony Abbott’s tax cut, which will bring the Coalition’s corporate tax take-back from 31.7 per cent to 30.2 per cent after taking account of the planned paid parental leave levy, is an incremental change that will do little to lessen business cynicism about Australian politics.

Abbott’s tax shell shuffle is not as bad as
Julia Gillard
’s transparently ridiculous people’s assembly on climate change, but it fits the policy stasis of both sides.

The absence of any big picture vision from either Abbott or Gillard is a source of deep frustration for those in business thinking about the challenges facing the country, particularly in relation to the ageing population, skilled immigration and the inadequate infrastructure planning for Sydney, Melbourne and Brisbane and the transport arteries that join them.

If Abbot was serious about tax reform he would swallow his pride and promise to make the Henry tax review the starting point for the sort of debate that never happened when Treasury secretary Ken Henry’s baby was strangled at birth in May by then prime minister Kevin Rudd.

The review should have been a catalyst for community consultation and debate about necessary changes to a system that is stifling innovation and distorting investment decisions.

The despair among business leaders about the lack of political leadership, at both the state and federal level, is triggering questions about the long-term social and economic impact of having Australians alienated from their government and distrustful of politicians who show no commitment to anything but the next opinion poll.